PRINCE2 7 Business Case Justification
The business case purpose
The purpose of the business case practice is to establish mechanisms to judge whether the project is (and remains) desirable, viable, and achievable as a means to support decision-making in its continued investment.
Organizations undertake projects to make measurable improvements in one or more aspects of
their business. These measurable improvements are called benefits. In cases of compliance or
regulatory projects, the benefits may be compared to the consequences of inaction.
PRINCE2 projects deliver outputs in the form of products which are used to facilitate changes in an
organization or for organizations. These changes create capabilities that lead to outcomes. The
outcomes allow the organization(s) to realize the benefits that are explained in the business case for
the project. Outcomes that are perceived as negative by one or more stakeholders are called
dis-benefits.
PRINCE2 7 business case definitions
Output: the tangible or intangible deliverable of an activity. In PRINCE2, outputs are the specialist products that will be used to enable change.
Capability: the completed set of project outputs required to deliver an outcome.
Outcome: the result of change, normally affecting real-world behaviour and circumstances. Changes are implemented to achieve outcomes, which are achieved as a result of the activities undertaken to facilitate the change.
Benefit: the measurable improvement resulting from an outcome that is perceived as an advantage by the investing organization and contributes towards one or more business objectives.
Dis-benefit: the measurable decline resulting from an outcome perceived as negative by the investing organization and which detracts from one or more business objectives.
Business objective: the measurable outcomes that demonstrate progress in relation to the organization’s strategy and to which the project should contribute.
All projects must have a business justification, usually documented in a business case. The business
case establishes not only the reason for the project but also confirms whether the project is:
- desirable (the balance of costs, benefits, and risks)
- viable (able to deliver the products)
- achievable (whether use of the products is likely to result in envisaged outcomes and resulting benefits).
Business Justification
Business justification is not only about costs but also about understanding the value of a project.
It is the perceived benefits or importance of the outcomes in proportion to the resources deployed to
achieve them. Moreover, business justification is about selecting an approach that offers the best overall value.
It is a PRINCE2 principle that a project must ensure continued business justification.
This requires that the business justification is established at the beginning of the project through the creation of a business case and then kept under regular review and updated in response to the decisions and events that might impact the desirability, viability, or achievability of the project.
If the business justification ceases to be valid, the project should be stopped or changed.
The business case is the main driver of all PRINCE2 projects and is the central living core of everything else that dovetails into it. Projects are usually about delivering business benefits.
The project has to be worth doing and the effort and costs employed to get the project done and must result in something worthwhile.
The driving force behind any project is therefore that the business case is and remains valid.
The way that the PRINCE2 method builds in the creation and then update of the business case is focused and logical, and this may not be the same way as your organization deals with a business case.
It is important to remember that the PRINCE2 is intended to be tailored and this is equally true to the way in which shall organization uses the business case.
The PRINCE2 business case is the method sets down a straightforward and sensible way to show how the project can be justified and that it did indeed deliver the goods.
The PRINCE2 business case and benefits management approach
These are two key documents that work in concert with each other, again to make it clear, the business case is the driver here.
The business case records the justification for the project which usually includes the benefits that result from the project.
By way of contrast, the benefits management approach sets down when the benefits will be measured, how they are to be measured and by whom.
That measurement is often at the end of the project or after it, but in some cases benefits may come on-stream earlier and start to be delivered during the project itself. This will be particularly true for an agile project that is using the PRINCE2 method.
PRINCE2 business case responsibilities
The project manager does not own the business case.
The project manager may do a lot of the work to construct the business case, but the responsibility lies with the executive who is the head of the project board and represents the business viewpoint on the project.
The project board executive is responsible for the identification and delivery of business benefits and working very closely with the senior user role is the way to make sure this happens.
The executive and senior user role must make time available during startup, during initiation and where necessary, during stages and then at the end of stages.
In particular they must get involved with the creation of the business case and the related plan for measuring benefits and then maintenance in order to keep them both current.
PRINCE2 project justification
The main thrust of the business case is to justify the project in the first place and to maintain that justification throughout the full life of the end product.
The focus within the PRINCE2 method is mainly on benefits as well as taking a wider view. In certain circumstances you can justify running a project that has no business benefits at all.
It is important to note therefore that a project need not be benefits driven. There are five key areas of business objectives and these include whether justification may not be benefit focused in the sense of measurable financial benefits.
These fine areas are compulsory projects, not for profit projects, evolving projects, customer/supplier projects and multi organization projects.
It is worth reminding ourselves that there is another business enabler which is the use of enabling projects, where the current project merely puts in place the products necessary for follow-up project to act to deliver the real and final business benefits.
Enabling projects help him what would otherwise be a large unwieldy project with the financial risk, and implement a self-contained, separately manage project as the front end.
PRINCE2 compliance projects
Within an organization there may be necessary to run a project because you’ve been told to such as to comply with new or changed legal requirements. This type of project is not save you money or any other benefits other than the fact that a compliance project allows your organization to continue its work.
PRINCE2 benefits driven projects
Most projects do indeed delivered business benefits. Wherever possible you must be able to measure such benefits even if in order to do so requires careful planning and critical thinking.
Be careful of those that say if you can’t measure something then it’s not a benefit.
Let me discuss the three main types of benefit driven projects:
Direct savings
Some benefits result in a cash saving, an example here would be replacing a system or regime that has a high maintenance costs with a new one which has low maintenance costs.
When the new system or machine is installed, the leftover money remains in the maintenance budget. This money is measurable, visible, and real and you can draw out and hold in your hand!
Quantifiable benefits
These are or where you cannot draw out the money and hold it in your hands, but with a benefit is nevertheless measurable – ideally in monetary terms.
An example here is the savings in staff time, perhaps your sales staff are having to do too much administration work which is reducing the time that they have available to carry out sales and marketing.
A project to streamline the administration and as a consequence releasing more time for each salesperson is a quantifiable benefit.
You do not wish to make the sales people redundant, just more efficient and effective. No direct savings made, because the salary bill stays the same.
You can however quantify the saving in hours, and you can also go on to state it in monetary terms by multiplying out the hours saved by the hourly rate of the sales staff. At its essence this is a measure of efficiency.
Claiming quantifiable benefits
Claiming many benefits is easy if you cannot measure them and no one can prove you wrong! An example here is a project that changes the company image either as a whole or in a particular area that directly interfaces with your customers.
One of the ways to measure such situations is to carry out a before and after survey, even though such measurements may be subjective. It is almost impossible to directly relate that back to either lost or increased business. In such cases, it is best to classify such benefits as important but not quantifiable.
Hybrid justifications
Just because the project is a compliance one or enabling one does not mean that you do not get any business benefits at all, as some may well exist. There is an opportunity he however to adjust the scope of such projects so that it does offer some business benefits.
Although such benefits resulting from this adjustment main uncover all of the project costs, it may offset at least a part of the costs.
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